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Searching threshold effects in the interest rate: An application to Turkey case

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  • Yavuz, Nilgun Cil
  • Guris, Burak
  • Yilanci, Veli

Abstract

This paper investigates the behaviour of interest rates in Turkey using a two-regime TAR model with an autoregressive unit root. This method recently developed by Caner and Hansen [Threshold autoregression with a unit roots, Econometrica 69 (6) (2001) 1555–1596] allows to simultaneously consider non-stationarity and non-linearity. Our finding indicates that the interest rate is a non-linear series and is characterized by a unit root process over the period 1990:1–2006:5.

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Bibliographic Info

Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

Volume (Year): 379 (2007)
Issue (Month): 2 ()
Pages: 621-627

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Handle: RePEc:eee:phsmap:v:379:y:2007:i:2:p:621-627

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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

Related research

Keywords: Threshold autoregressive model (TAR); Unit root; Interest rates;

References

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  1. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  2. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, vol. 62(6), pages 1383-1414, November.
  3. Joseph Alba & Donghyun Park, 2005. "Non-linear mean reversion of real exchange rates and purchasing power parity: some evidence from Turkey," Applied Economics Letters, Taylor & Francis Journals, vol. 12(11), pages 701-704.
  4. Lee, Jim, 2002. "Federal funds rate target changes and interest rate volatility," Journal of Economics and Business, Elsevier, vol. 54(2), pages 159-191.
  5. Mehmet Caner & Bruce E. Hansen, 2001. "Threshold Autoregression with a Unit Root," Econometrica, Econometric Society, vol. 69(6), pages 1555-1596, November.
  6. Philip Arestis & Andrea Cipollini & Bassam Fattouh, 2003. "Threshold Effects in the US Budget Deficit," CEIS Research Paper 18, Tor Vergata University, CEIS.
  7. Bassam Fattouh, 2005. "Capital mobility and sustainability: Evidence from U.S. current account data," Empirical Economics, Springer, vol. 30(1), pages 245-253, 01.
  8. Narayan, Paresh Kumar, 2006. "The behaviour of US stock prices: Evidence from a threshold autoregressive model," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 71(2), pages 103-108.
  9. Alba, Joseph D. & Park, Donghyun, 2005. "An empirical investigation of purchasing power parity (PPP) for Turkey," Journal of Policy Modeling, Elsevier, vol. 27(8), pages 989-1000, November.
  10. Sekioua, Sofiane H., 2006. "Nonlinear adjustment in the forward premium: evidence from a threshold unit root test," International Review of Economics & Finance, Elsevier, vol. 15(2), pages 164-183.
  11. Hansen, Bruce E, 1996. "Inference When a Nuisance Parameter Is Not Identified under the Null Hypothesis," Econometrica, Econometric Society, vol. 64(2), pages 413-30, March.
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